Legal Updates

When a comprehensive agreement is signed to cease joint operation one cannot make a contention for a right stemming from the original agreement

March 13, 2024

A party to a joint venture sought funds owed to it by virtue of the original agreements between the parties, despite the fact that the parties signed a separation agreement that regulated the end of their business relationships and conducted a final accounting. This was on the grounds that the reason for receiving those funds was not mentioned in the separation agreement or in the final accounting prepared under thereunder.

The Court rejected the claim due to exhaustion of the parties' claims in the separation agreement. In principle, terminating an agreement without creating a new one in its place, entails a mutual right to recover what was given prior to the termination. However, when the parties enter into a new agreement which purpose is to replace the original agreement and end the parties' claims on the basis thereof, it is no longer possible to seek remedies based on the original agreement as the new agreement is intended to prevent such claims and replace them. Here, after completing the separation and the final accounting, in accordance with the new agreement, one party contended that it is entitled to additional consideration based on the original agreement between the parties. The separation agreement was intended to resolve the disputes and end the relationship between the parties, while fully exhausting their claims, and therefore it is not possible to contend a breach of an obligation stipulated in the original agreement even if it wasn’t explicitly addressed within the separation agreement.